Opinions tend to differ when it comes to programmatic advertising. Is it a question of man or machine. Is it done according to instinct or hyperrationality. The best solution is a little bit of everything. My dear publishing house friends, stay critical and keep your most valuable inventory close to your chest. Do not pass it on to others. Why? I’ll give you five good reasons why programmatic advertising is anything but the promised land for publishing houses.
1. The agencies take the lion’s share of your revenue. It’s a shame, but true. The idea of a publishing house passing on valuable inventory to an agency and in return making money by essentially doing nothing is quite tempting. This also explains the results from various research institutes. They all forecast great things for programmatic advertising. However, upon closer examination, the idea of making money by doing nothing quickly becomes a nightmare for publishing houses. Neil Thackray, experienced sector specialist and co-founder of Briefing Media Ltd, has witnessed how agency services quickly degenerate into unhealthy dependencies. This happens whenever publishing houses abandon the traditional ad business with its 85% returns and agencies take on programmatic marketing of the publishing house’s ad inventory. According to Thackray’s calculation, returns drop in these cases to 30%. With a downward tendency. Why? Once you are dependent on external service providers, you lose a lot of leverage in negotiations. A horror scenario.
2. Sellable inventory is the greatest good a publishing house has. According to an estimate by Magna Global, one-third of all ad space in Germany will be programmatic advertising in 2017. Success can no longer be so easily dismissed today. Huge amounts of information about readers, a publishing house’s customers, are already available. The customer is well-known, almost transparent. There is a lot of powerful hardware and software out there to glean this type of information. Adaptive algorithms – the next generation of colleagues – and scalable cloud infrastructures help analyze data in real-time and convert the information directly into plans of action. Programmatic infrastructure is not a dream for the future. It is here and now. The good news is that the data and technical infrastructure already exists in publishing houses. Whoever passes on their sellable inventory to a third-party for purposes of programmatic advertising, is making a mistake.
3. Ad customers do not talk to algorithms. Whoever gives up control of his ad space, loses direct contact to his ad customers. Hyperrational algorithms are replacing human empathy. This cannot be the future that publishing houses are hoping for. Not for premium ad space and certainly not for local ads. This is where you need to be close to your customer, canvass door-to-door and value personal contact. Hyperlocal marketing, whose potential can only be fully realized by carefully grooming personal relationships, represents a huge opportunity for regional publishing houses. In addition, publishing houses already have all the programmatic advertising ammunition they need. Automation is an indispensable element. Evaluating data pools is the hot topic. Publishing houses only have to stand up against agencies. Auctioning off residual ad space is an excellent idea. Publishing houses can often realize a significantly higher return than if they sell this inventory directly.
4. Sales partners enhance digital inventory. Publishing houses are not lone wolves. Publishing houses are heavy-weights in those organizations that represent the media industry. Within these associations, individual publishing houses can maximize revenues. The larger the volume of inventory, the greater the marketing success. Madsack or the RP are already doing it with great success. The inventory of all their offers are bundled and available to customers. That adds value. Except for data analysis, sales partners are the most important element for success in internal programmatic advertising.
My message to publishing houses: Exploit the numerous advantages of programmatic advertising and combine these with highly trained media consultants and yield management to optimize your digital ad space revenue streams and then stand up to third-parties who are looking to take a piece of your pie.
And don’t forget: This is not about building a fortress or shutting out new technologies. Programmatic advertising is important and appropriate. Whether programmatic advertising is now the saving grace or simply the next big challenge, does not matter. The technology is out there. And rightfully so. But passing on all your data, your inventory and your customers to external agencies where you are just another customer, is short-sighted and wrong. That would be a step in the wrong direction.
5. Learn from the past. Too often in the past, the field has simply been abandoned to the new guys. Facebook and Google are just two examples. We cannot allow this to happen again in the publishing sector. Google has spent a lot of money on a lot of studies pushing programmatic advertising. Agencies have been sending representatives to symposia and industry events to sing the praises of programmatic advertising. Not a word has been spoken by the publishing houses. This is a trend that we have to work together to stop. Therefore I advocate that publishing houses analyze their data in-house, use their sales partners to market inventory and do their own internal programmatic advertising.
This is the future I see for publishing houses.